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Physical assets

Commodity Tokenization

Warehoused commodities represented as units, where grade, assay, storage and spoilage are part of the instrument rather than footnotes.

Standards, ordered by control over a transferFour token standards as rungs, from one where anyone may hold up to one where a transfer can be refused by the contract itself.ERC-20anyone may holdERC-1155batched, still openERC-4626a vault around oneERC-3643a transfer can be refused

Definition

Commodity tokenization represents a claim on a physical commodity — metals, agricultural produce, energy products — usually evidenced by a warehouse receipt. Unlike gold, most commodities are not indefinitely storable and not perfectly fungible: grade, origin and condition all affect what the claim is worth.

What it solves

  1. Financing tied up in inventoryCommodity holders often need working capital against stock they cannot sell yet.
  2. Paper warehouse receiptsReceipts have been duplicated and pledged twice more than once in the industry’s history. A single register makes double-pledging visible.
  3. Fragmented ownership recordsTitle to warehoused goods moves through brokers and is frequently reconciled by email.

How it works

  1. Goods are deposited and inspectedA warehouse operator issues a receipt; an inspector certifies grade and quantity.
  2. The receipt backs the unitsUnits are issued against certified, stored quantity.
  3. Storage and condition are monitoredCosts accrue and condition is re-certified on a cadence appropriate to the commodity.
  4. Redemption releases goods or cashAgainst the receipt, subject to lot size.

Architecture

A warehouse operator and an independent inspector; a lot register carrying grade, quantity and location; a valuation tied to a published benchmark where one exists; and a token issued per lot or per grade rather than across incompatible qualities.

How the platform is arrangedFour stages — asset, compliance, offering and register — connected left to right, all enclosed by a single transaction boundary that rests on a double-entry ledger.AssetStructured and documentedCompliancePolicy in forceOfferingA book that is derivedRegisterHolders of recordOne transaction boundaryA movement and the entries behind it commit together, or neither doesDouble-entry ledgerEvery movement, both sides, in minor unitsBalanced at COMMIT
Four stages inside one transaction boundary, on one ledger. A register that disagrees with the cash is not a state the software can reach.

Tokenization lifecycle

  1. Deposit and certifyGoods warehoused, inspected, graded.
  2. IssueUnits issued against the certified lot.
  3. Store and re-certifyStorage costs accrue; condition re-verified.
  4. Trade or financeUnits transferred or pledged.
  5. ReleaseGoods released against redemption, or sold and proceeds distributed.

Supported token model

Permissioned fungible token per grade and location; non-fungible per lot where lots are not interchangeable. Fungibility follows the commodity. Refined metal of one grade in one warehouse is interchangeable; a specific parcel of an agricultural crop with its own harvest date and moisture content is not, and pooling them would misrepresent the claim.

Asset requirements

What must be true before this can responsibly be tokenized at all.

  • A bonded or otherwise credible warehouse with a receipt system.
  • Independent inspection certifying grade and quantity on deposit.
  • Insurance covering the stored goods.
  • A valuation reference — an exchange benchmark where one exists, a documented method where it does not.
  • For perishables, a shelf-life policy and a re-certification cadence.

Compliance considerations

  • Commodity trading is separately regulated in most jurisdictions, distinct from securities regulation.
  • Sanctions and origin controls apply to many commodities and must be checked at the asset level, not just the investor level.
  • Warehouse receipt law is jurisdiction-specific and determines whether the claim survives the warehouse’s insolvency.
A compliance policy as ordered rulesRules are evaluated in sequence and the first match decides. A subject matching no rule is denied, and a fact the platform does not know never satisfies a rule.Subjectan investor's facts#1Screening hit is openreject#2Country in the blocked listreject#3Professional or institutional, verifiedallowMatched no ruledenyFirst matchdecides. A laterallow cannot undoan earlier reject.Eligibility comesfrom a rule saying so.
Rules are data, evaluated in sequence, and the first match decides. A subject matching nothing is denied — eligibility comes from a rule saying so, never from no rule objecting.

Investor workflow

  • Verify identity and eligibility.
  • Review the inspection certificate and the storage arrangement.
  • Subscribe and fund by reference.
  • Hold; storage costs accrue against the vehicle and are disclosed.
  • Redeem for goods at lot size, or exit for cash.

Issuer workflow

  • Arrange warehousing, inspection and insurance.
  • Record the lot with its grade and quantity.
  • Issue units against the certified lot only.
  • Re-certify on cadence and report condition honestly.
  • Handle release or disposal at exit.

Payments

Subscriptions are held as an investor liability until allocation. Storage, insurance and inspection costs accrue against the vehicle and reduce what is distributable, so they are recorded as they arise rather than deducted silently at exit.

The payment railMoney is matched to a subscription by its reference and no other attribute, then screened and settled. Provider adapters for card and crypto rails are not built, and are drawn as an absent component.ReferencechecksummedFunds arrivebank or custodyReconcilereference or nothingScreenAMLSettlesecond authoriserSuspense (2900)unidentified, and visibleNo reference matchProvider adaptersCard, local rail, stablecoinNot built — the registry ships empty
A reference is the only thing that matches money to a payment. Everything else is an exception for a person, and unidentified credits post to suspense where they stay visible.

Lifecycle servicing

Servicing is physical: storage, inspection, condition and cost. For perishables the passage of time is itself a risk that the instrument must account for.

How a distribution is splitA funded pool is divided among holders of record as at the record date using largest-remainder allocation, then withholding is deducted from each holder's gross rather than from the pool.Funded poolone exact amountRegister as atthe record dateRebuilt from confirmedmovements, not today’sbalancesNet to the holderWithheld, from that holder’s grossThe lines sum to exactly what was fundedLargest-remainder allocation, so no minor unit is created or lost. Rounding each slice independently leaves the issuer a few units out every cycle.There is no per-jurisdiction withholding matrix in this build — one rate is entered per run.
Holders of record as at the record date, split by largest remainder so the lines sum exactly, with withholding taken from each holder’s gross rather than off the top of the pool.

Secondary transfer

Transfers work where the units are fungible within a grade and location. Across grades or warehouses they are different instruments and should not be pooled.

The transfer gateA transfer request passes through eight compliance checks. Any single failure refuses the transfer; the same gate is evaluated off-chain and on-chain.Senderholds unitscanTransfer( )Sender holds the unitsNeither party frozenLockup expiredRecipient eligible under policyJurisdiction permittedInvestor type permittedHolding limit not breachedSanctions screening clearRecipientunits move, or none doOne implementation. The Solidity module and the register evaluate the same rules.
One implementation of the gate, not two. The function the register calls is the same one that mirrors the Solidity compliance module check for check, so an off-chain gate and an on-chain gate cannot drift.

Risks

Named plainly. An instrument whose risks are only in a footnote has been mis-sold before it has been issued.

  1. Spoilage and degradationMost commodities are not gold. Quality falls, and with it the value of the claim.
  2. Warehouse fraudDuplicate receipts and phantom inventory are a documented failure mode in this industry, not a theoretical one.
  3. Price volatilityCommodity prices move sharply and are driven by factors no issuer controls.
  4. Basis and grade riskA benchmark price is for a reference grade at a reference location; the actual lot may be worth materially less.
  5. Storage cost dragCarrying costs accumulate whether or not the price moves.

How we support it

  • Per-lot registers where lots are not interchangeable, so nothing is pooled that should not be.
  • Oracle and valuation records tying a mark to a source and a date.
  • Proof-of-reserve style attestation records against the stored quantity.

Questions

Can I take delivery of the commodity?

Where the terms permit and your holding meets the minimum lot. Logistics and duties fall to the holder.

Who pays storage?

The vehicle, out of the asset. It reduces what is ultimately distributable and is disclosed rather than hidden in the exit price.

What stops the same goods backing two issues?

The lot register and independent inspection. This is the specific fraud the asset class is prone to, so the control is named rather than assumed.

Next steps

Bring an instrument you are actually considering. Structuring something real is the only way to judge whether the model fits.

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